In any given period, a firm's flow of investment demand is determined by

Question

Quizplus · Accepted Answer

A firm's flow of investment demand in a given period is determined by the change in the firm's optimal capital stock. This is because a firm's investment demand depends on the level of capital stock that maximizes its profits. As the optimal capital stock changes due to changes in market conditions, technology, or other factors, the firm's flow of investment demand will also change to reflect this new optimal level. Option B is incorrect because it refers to the rate of change of investment demand, which is not the same as the level of investment demand. Option C is incorrect because it refers to the change in the optimal flow of investment, which is not the same as the flow of investment demand itself. Option D is incorrect because it refers to the rate of change of the capital stock in the entire economy, which could affect a firm's investment decisions indirectly, but is not the primary determinant of the firm's investment demand.

In Any Given Period, a Firm's Flow of Investment Demand